International Congress on Ports in Proximity:Competition, Cooperation and IntegrationAntwerp / Rotterdam, December 5 – 7 2007

Port Hinterland Divergence along the North American Eastern SeaboardJean-Paul RODRIGUEDepartment of Economics & GeographyHofstra University, Hempstead, New York 11549, USA

Changqian GUANIntermodal Transportation & Logistics Program, Department of Marine Transportation, U.S. Merchant Marine Academy, Kings Point, New York, USA

Ports in Proximity along the Eastern Ports in Proximity along the Eastern SeaboardSeaboard

A. Globalization, Trade and Port Divergence in North America

B. Cargo Volume Growth and Shipping Services

C. Port Regionalization and Potential Port Hinterland Divergence

D. Conclusion: From Divergence to Convergence?

A. Globalization, Trade and Port Divergence A. Globalization, Trade and Port Divergence in North Americain North America

1. Factors of Port Divergence• What are the main processes behind divergence?

2. Containerized Traffic Trends• How containerization has evolved along the East Coast in

recent years?

3. Traffic Concentration• What is the extent of the divergence taking place?

1. Factors of Port Divergence1. Factors of Port Divergence

SiteSite Conventional factor (modal access and accessibility). Reinforced by new generations of containerships.

Ocean CarriersOcean Carriers Choice of port calls and frequency of service. Choice of network structure.

Port OperatorsPort Operators Choice of asset allocation. Differences in terminal productivity.

PolicyPolicy Port governance and public funding. Landlord ports and privately developed ports. Shape of private / public partnerships.

HinterlandHinterland Access to long distance transport corridors. Access to the regional customer base.

Supply Chain Supply Chain ManagementManagement

Production and distribution requirements (scheduling, frequency).

2. A Schematic Representation of the Eastern Seaboard

St. Lawrence“The Funnel”Direct to the

bottleneck: Montreal

Upper Range“The Empty Sink”

Weak handles: Halifax and Boston

Mid Range“The Full Sink”

Strong handles: New York and Hampton

Roads

Lower Range“The Filling Sink”

Strong center:Charleston / Savannah

Upper RangeUpper RangeMid RangeMid Range

Lower RangeLower Range

St. LawrenceSt. Lawrence

2. Container Traffic at Eastern Seaboard 2. Container Traffic at Eastern Seaboard Ports, 2006Ports, 2006

5.09

2.16

2.05

1.97

1.29

0.98

0.86

0.77

0.63

0.53

0.26

0.25

0.24

0.20

0.18

0.12

0 1 2 3 4 5 6

New York/New Jersey

Savannah

Hampton Roads

Charleston

Montreal

Miami

Port Everglades

Jacksonville

Baltimore

Halifax

Wilmington(DE)

Philadelphia

Palm Beach

Boston

Wilmington(NC)

St. John's

Millions

22ndnd Tier (Gateways) Tier (Gateways)

33rdrd Tier (Regional Gateways) Tier (Regional Gateways)

44thth Tier (Niche ports) Tier (Niche ports)

Articulation GatewayArticulation Gateway

Divergence ThresholdDivergence Threshold

3. Concentration of Containerized Traffic, 3. Concentration of Containerized Traffic, 1985-20061985-2006

0%

20%

40%

60%

80%

100%

20062000199519901985

Other

Top 5

Diffusion of ContainerizationDiffusion of Containerization

Hinterland EffectHinterland Effect

3. Concentration of Containerized Traffic, 3. Concentration of Containerized Traffic, 1985-2006 (Lorenz Curve)1985-2006 (Lorenz Curve)

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0 0.2 0.4 0.6 0.8 1Cumulative Ports

Cum

ulat

ive

TEU

s

2006

2000

1995

1990

1985ConvergenceConvergence

DivergenceDivergence

B. Cargo Volume Growth and Shipping B. Cargo Volume Growth and Shipping ServicesServices

1. Traffic trend among major East Coast Ports• From convergence to divergence?

2. The resurgence of All Water Services• What are the underlying factors?

3. Service routes and transit times• How Landbridge and All Water Services compare?

1. Change in Container Traffic at Eastern Seaboard Ports

0.77 M TEU0.77 M TEU8.36 M TEU8.36 M TEU

1.31 M TEU1.31 M TEU

+0.04 M TEU+0.04 M TEU

+0.28 M TEU+0.28 M TEU

+3.02 M TEU+3.02 M TEU +2.01 M TEU+2.01 M TEU

7.19 M TEU7.19 M TEU

1. Strong Divergence: Montreal and Halifax1. Strong Divergence: Montreal and Halifax

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000Halifax

Montreal

1. Strong Divergence: Montreal and Halifax1. Strong Divergence: Montreal and Halifax

-25%

-15%

-5%

5%

15%

25%

35%

45%

Halifax

Montreal

ConvergenceConvergence DivergenceDivergence

Zero-sum game?Zero-sum game?

1. From Convergence to Divergence: the 1. From Convergence to Divergence: the American East CoastAmerican East Coast

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

Charleston

Norfolk

New York

Savannah

1. From Convergence to Divergence: the 1. From Convergence to Divergence: the American East Coast (Annual Growth Rates)American East Coast (Annual Growth Rates)

-25%

-15%

-5%

5%

15%

25%

35%

45%

Charleston Norfolk

New York Savannah

DivergenceDivergence ConvergenceConvergence DivergenceDivergence

Equa

tor

2. The Resurgence of All Water Services to the East Coast

LandbridgeLandbridge

Westbound Westbound RouteRoute

Eastbound Eastbound RouteRoute

Algeciras

Gioia Tauro

Jeddah

Colombo

Singapore

Hong Kong

Shanghai

PusanKobe

LA/LB

Seattle / Vancouver

PanamaPanamaRouteRoute

““China Effect”China Effect”

West Coast CongestionWest Coast CongestionLandbridge CongestionLandbridge Congestion Growth in the SoutheastGrowth in the Southeast

New Distribution GatewaysNew Distribution Gateways

3. Service Routes and Transit Times: Far 3. Service Routes and Transit Times: Far East to New YorkEast to New York

14

14

16

18

18

24

21

26

23

25

22

23

0 5 10 15 20 25 30

Busan

Tokyo

Shanghai

Kaohsiung

Hong Kong

Singapore

Land Bridge All Water

-1-1

+4+4

+7+7

+7+7

+12+12

+7+7

3. Service Routes and Transit Times: Far 3. Service Routes and Transit Times: Far East to Norfolk, VirginiaEast to Norfolk, Virginia

14

14

16

18

18

24

23

26

24

25

22

23

0 5 10 15 20 25 30

Busan

Tokyo

Shanghai

Kaohsiung

Hong Kong

Singapore

Land Bridge All Water

-1-1

+4+4

+7+7

+8+8

+12+12

+9+9

3. Service Routes and Transit Times: Far 3. Service Routes and Transit Times: Far East to Savannah, GeorgiaEast to Savannah, Georgia

14

16

18

19

18

28

25

24

22

22

21

25

0 5 10 15 20 25 30

Busan

Tokyo

Shanghai

Kaohsiung

Hong Kong

Singapore

Land Bridge All Water

-3-3

+3+3

+3+3

+4+4

+8+8

+11+11

Equa

tor

3. The Resurgence of All Water Services to the East Coast

LandbridgeLandbridge

Westbound Westbound RouteRoute

Eastbound Eastbound RouteRoute

Zone of ContestabilityZone of Contestability

Equilibrium

Equilibrium

(indifference) Point

(indifference) Point

New York (1):75% (2005)60% (2020) New York (2+3):

25% (2005)40% (2020)

NYNY

SavannahSavannah

PanamaPanamaRouteRoute

New Direct LinksNew Direct Links17 (2002)17 (2002)26 (2007)26 (2007)

1

2

3

3. Service Time Reliability to the EC: All Water Services vs. Transpacific / Landbridge

18 days

NY: 22 daysSavannah: 21 days

Port congestionOffshore transshipmentTransloadingUnit train assemblyRail congestionTransmodal operationsRoad congestion

Port congestionOffshore transshipmentPanama / Suez Delays

Transpacific / Landbridge

All Water Services

3. Monthly Inbound Traffic, Port of Los Angeles (TEUs)3. Monthly Inbound Traffic, Port of Los Angeles (TEUs)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Janua

ry

Februa

ryMarc

hApril

MayJu

neJu

ly

August

Septem

ber

Octobe

r

November

Decem

ber

2004

2005

2006

2007

3. Summary3. Summary

Supply chain management• Landbridge is critical for high value cargo from East Asia

due to its short total transit time.

• The 7 day difference is quite critical. Inland areas cargo (e.g. Chicago) • Landbridge still has an overall advantage.

Hong Kong and Singapore• Points of equilibrium between landbridge and all water

service has a slight advantage in terms of transit time. South Atlantic ports• All water service is very competitive.

• South Atlantic ports are in a good position to compete with North-Mid Atlantic ports for hinterland markets.

C. Port Regionalization and Potential Port C. Port Regionalization and Potential Port Hinterland DivergenceHinterland Divergence

1. Port Infrastructure Development and Intermodal Services• What are the major infrastructure projects?

2. The reemergence of the “hinterland factor”• How the maritime / land interface is being modified?

3. Port regionalization strategies• How specific gateway ports are improving their regional

hinterland access?

1. Port Infrastructure Development and Intermodal Services

New YorkNew YorkDredging (50’)On-dock rail

PIDN

Hampton RoadsHampton RoadsAPM TerminalCraney Island

Terminal (2017)Heartland Project

CharlestonCharlestonNew Terminal

(2013)Terminal upgrade

Dredging (47’)

SavannahSavannahNew berth

Improved rail yards

2. The Reemergence of the “Hinterland Factor”: Rail Gateways and Metropolitan Freight Centers

New York• 85% are local cargo• 14% is distributed by rail• Less than 1% is distributed by water

Hampton Roads• Over 47% of cargo originates or is destined for locations within Virginia• 53% of cargo are hinterland bound

2. The Reemergence of the “Hinterland Factor”: Inland Corridors

2. Heartland Corridor Project, Virginia / Chicago

Current Double Stack RouteCurrent Double Stack Route(1,264 miles to Chicago)(1,264 miles to Chicago)

Heartland CorridorHeartland Corridor(1,031 miles to Chicago)(1,031 miles to Chicago)

Virginia Inland PortVirginia Inland Port

28 Tunnels Modified 28 Tunnels Modified to a 20’ 3” Clearanceto a 20’ 3” Clearance

D. Conclusion: Challenges and Opportunities of the New Panama Canal (New Panamax – 12,000 TEU)

Equa

tor

Westbound Westbound RouteRoute

Eastbound Eastbound RouteRoute

Algeciras

Gioia Tauro

Jeddah

Colombo

Singapore

Hong Kong

Shanghai

PusanKobe

LA/LB

Kingston

PanamaPanama

SuezSuez

D. Conclusion: Challenges and Opportunity for Arctic Routes

Russia

ChinaCanada

Un

ited

Sta

tes

Kazakhstan

Mongolia

New York

Vostochny

Lianyungang

Archangel'sk

Brest

Druzhba

Zabaykalsk

Oulu

Lokot

Perm'

Astana

Harbin

Urumqi

Beijing

IrkutskLanzhou

VologdaVainikkala

Ulaanbaatar

Novosibirsk

Yekaterinburg Presnogorkovka

Halifax

MoscowSt. Petersburg

El Paso

Chicago

Kansas CIty

Minneapolis

Salt Lake CityTacoma

Oakland

Houston

Savannah

Montreal

Vancouver

Long Beach

Haparanda/Tornio

New York

Rotterdam

Maritime Segment

Rail Main Trunk (Broad Gauge)

Rail Main Trunk (Standard Gauge)

Port

Gauge Change

Rail Terminal

Azimuthal Equidistant Polar Projection

Arctic Bridge

Northern Sea Route

Northwest Passage

D. Conclusion: From Divergence to D. Conclusion: From Divergence to Convergence?Convergence?

There is a divergence favoring a specific number of ports• Site: Limited number able to accommodate larger ships.

• Ocean carriers: Emergence of all water services as a new dimension of standard port calls.

• Port operators: Allocation of capital investment.

• Policy: Ongoing privatization, albeit at a slower pace.

• Hinterland: Development of rail corridors, particularly towards the Chicago hub.

• Supply chain management: A stronger factor than accounted.